N Brown sees online push pay off

N Brown, the group behind brands Simply Be, Jacamo and JD Williams, has revealed a return to profit in its first half as an online push starts to pay off.

Shares jumped 8% as it posted pre-tax profits of £18.8 million for the six months to 31 August, against losses of £27.1 million a year ago.

Revenues dropped 5.4% to £432.9 million, but the group saw combined online sales grow 5% across womenswear and menswear.

It said online now accounts for 84% of its business, up from 80% in the previous financial year.

Chief executive Steve Johnson said: “We announced our new strategy in May to return N Brown to sustainable profit growth and we have made good progress over the first half of the year.

“The retail environment remains heavily promotional, but we are concentrating on continuing to improve our customer proposition and ensuring we operate as efficiently as possible.”

On an underlying basis, pre-tax profits lifted 4% to £31.8 million.

The figures come after N Brown revealed last month that it was setting aside more to cover the cost of payment protection insurance (PPI) mis-selling compensation after seeing related inquiries surge tenfold in the run-up to the claims deadline.

It confirmed in its half-year figures that it is putting by an extra £25 million – having already paid out £108 million for PPI so far.

N Brown, which is based in Manchester, has been shifting to online sales, last year axing 20 shops while also retrenching overseas to focus on the UK.

Revenues are still being weighed down by the store closure programme and overseas exit, but the group is putting faith in the rise of online sales to begin offsetting this.

It saw financial services revenue growth slow to 2.9% in the half year after it took the decision in the second quarter to limit credit increases and tighten affordability checks.

Caroline Gulliver, retail analyst at Jefferies, said: “The sales drag should continue, but there are some encouraging signs to watch.”

The figures mark a turnaround after a tough 2018 for N Brown, which lost a long-running dispute with the taxman and saw the abrupt departure of former chief executive Angela Spindler.

The VAT ruling in November will mean marketing costs are now likely to be between £6 million and £9 million higher from 2020 due to irrecoverable tax.